US-based investment firms Carlyle and KKR, through their respective credit businesses, have agreed to purchase a portfolio of student loans from Discover Financial Services, worth up to $10.1bn.
Carlyle’s investment in the portfolio was led by its Credit Strategic Solutions (CSS) team within its Global Credit business, focusing on asset-backed investments.
The CSS team leverages the entire Carlyle investment platform to provide asset-focused financing solutions to businesses, specialty finance companies, banks, asset managers, and other originators and owners of diversified asset pools.
Carlyle credit strategic solutions head Akhil Bansal said: “This acquisition highlights Carlyle’s proven expertise in private student loans and asset-backed finance, demonstrating our Global Credit business’s ability to provide scaled, tailored solutions to meet our clients’ dynamic needs.
“As the lending space evolves, we believe private markets are well-positioned to offer financial institutions increased flexibility amidst this transformation.”
KKR invested in the portfolio primarily from its asset-based finance strategy and other credit vehicles and accounts.
Since 2016, KKR has made over 80 ABF investments worldwide, through a combination of portfolio acquisitions, platform investments, and structured investments.
The company manages around $54bn in ABF assets under management and a team of more than 50 professionals dedicated to the ABF effort worldwide.
The transaction is expected to be completed by the end of this year, subject to certain customary closing conditions.
KKR managing director RJ Madden said: “We are pleased to leverage our scale, deep experience in ABF investing and capital markets capabilities to be a capital solutions provider of choice to financial institutions that are focusing on optimizing their balance sheets.
“This transaction demonstrates the value that scaled private lenders can bring to key areas of the economy as the priorities of traditional lenders continue to evolve.”
KKR Capital Markets and TCG Capital Markets structured and arranged the debt for the transaction.
Monogram, a portfolio company of Carlyle, will serve as the portfolio manager for the acquired student loan portfolio.
Firstmark Services, a subsidiary of US-based financial services company Nelnet, will service the loans in the portfolio.
Sidley Austin served as a legal advisor to KKR and Carlyle, while Paul Hastings also served as a legal advisor to Carlyle and Clifford Chance as a legal advisor to KKR, on this transaction.
Wells Fargo served as an exclusive financial advisor, while Skadden, Arps, Slate, Meagher & Flom served as legal counsel to Discover Financial Services.
Discover consumer banking executive vice president and president Dan Capozzi said: “We’re very pleased to consummate this transaction with two outstanding strategic partners in Carlyle and KKR.
“This agreement represents an important milestone in our journey to simplify our operations and business mix.”
Earlier this year, Carlyle acquired a $415m private student loan portfolio from Truist Bank.
